Is Your Employer a Severance Payer Under the Ontario Employment Standards Act, 2000?

Employees in Ontario are either federally regulated or provincially regulated. Most employees are provincially-regulated meaning the Ontario Employment Standards Act, 2000, SO 2000, c 41 [“ESA”] governs many aspects of the employment relationship between employer and employee. One of the more contentious and litigated issues of the employment relationship is what the employee is entitled to if they are terminated without cause. In this respect, the ESA is important as it sets out the minimum entitlements that an employee must receive regardless of what might be contained in an employee’s contract of employment. These are often referred to as an employee’s “minimum entitlements on termination.”

Under the ESA, there are three key minimum entitlements an employee is entitled to in the event of termination without cause:  1) notice of termination or pay in lieu thereof, 2) benefit continuation and 3) severance pay.

Severance pay is owed to an employee provided 1) the employee has at least five years of service with the employer and 2) the employer a) has a payroll of $2.5 million or more or, b) if the employee is part of a broader layoff of at least 50 employees involving the discontinuance of all or part of an employer’s business.

More often than not severance pay is owed because the employee has five years of service and because the employer’s payroll is $2.5 million or more. It is less common that an employee is part of a broader layoff involving 50 or more employees. As such it can often be critical to determine whether or not the employer has a payroll high enough so that severance pay will be owing on termination.

Moreover, an employee’s minimum entitlements to notice of termination pay can be capped to a maximum of 8 weeks of pay if the employee has signed an employment contract with an enforceable termination clause. Severance pay, however, can be up to a maximum of 26 weeks of pay. Accordingly, whether or not an employer is a severance payer can be the difference between an employee being entitled to only 8 weeks of termination pay or 34 weeks of termination pay. The stakes can be quite high.

The question then is how to measure an employer’s payroll for the purposes of the ESA. Do we only count employees working in Ontario to calculate the employer’s total payroll? Only employees in Canada? What if the company is multi-national? This very question was litigated in the case of Paquette c Quadraspec, 2014 ONCS 2431 [“Quadraspec”]. In that case, the employer argued that to calculate the employer’s payroll for the purposes of the ESA, only the wages of Ontario employees ought to be considered. If this were the case, the employer would not have met the $2.5 million threshold and would not have been obliged to pay severance to the employee. The Plaintiff, on the other hand, argued that the wages of all employees whether in Ontario or elsewhere ought to be added up in order to calculate the employer’s payroll for the purposes of the ESA. In its decision, the court found that the ESA requires an employer to pay severance pay based on the “total wages earned by all employees of the employer” which properly interpreted means the total wages earned by all employees of the employer whether in Ontario or elsewhere. As a result, the employee was successful and the court ordered that the employer pay severance pay to the employee in accordance with the ESA.

If you have been terminated make sure to speak with an experienced employment lawyer to make sure you are getting a fair severance package and one that complies with the minimum standards under the Ontario Employment Standards Act, 2000. Call Monkhouse Law today for a free 30 minute phone consultation.

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